China's New Prime Minister Faces Test in Bolstering Economy

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HONG KONG -- China's new prime minister, Li Keqiang, entered the job on Friday inheriting a wobbling economy that could distract his government from its bold vows to clean up pollution and harness expanding towns and cities as an engine for growth.

Mr. Li is the latest Communist Party leader whose promotion to a top government post was confirmed by the National People's Congress, the party-run Parliament that is finishing a transfer of elite power that was started at a party meeting in November. He succeeds Wen Jiabao in a position that entails steering the economy and government operations through the State Council, or cabinet.

On Thursday, the nearly 3,000 compliant Parliament delegates installed the party chief, Xi Jinping, as president, and on Saturday they will appoint deputy prime ministers, ministers and other senior officials.

Mr. Li, 57, has already laid out a vision of economic uplift driven by urbanization. He gained a doctorate in economics from Peking University, where he wrote about narrowing the urban-rural gulf. In the months leading up to his elevation as prime minister, he has said that faster and sounder expansion of towns and cities will be a priority, and he told Parliament delegates that absorbing rural migrants into urban areas would require more spending.

"Meshing together urban and rural development means we must speed up social improvements, with a focus on welfare and livelihood needs," Mr. Li said last week, according to the news agency Xinhua. "Government work and fiscal outlays must continue to be tilted toward livelihood needs," he added, naming education, health care and housing as among the spending priorities.

Yet Mr. Li inherits economic hazards that could preoccupy his government and deter bold policy moves. The hazards include an overheated property market that has defied government measures intended to tame price increases and make housing more affordable, worries about debts run up by local governments, and cautious lower-income consumers who remain reluctant to spend at the level many economists say is needed for healthy growth over the long term.

"I do think that there are some signs that, first of all, they recognize this is a new world, and the market economy or liberalization has given great successes but also great vulnerabilities," said Yukon Huang, a senior associate at the Carnegie Endowment for International Peace in Washington who studies the Chinese economy.

Mr. Li and his cohort believe that China "needs a growth driver in the next 5, 10, 15 years, because it can't rely upon exports again and can't rely on investment expansion for the sake of investment expansion," Mr. Huang said.

Last year, China's economy grew by 7.8 percent, compared with a year earlier, the slowest pace since 1999. The property market has been a driver of that growth, but a recent sharp rise in prices has kindled jitters about a potential bubble. On March 1, Mr. Wen's State Council took a parting jab at the sector, demanding that local governments enforce an earlier rule imposing a 20 percent tax on profits when people sell secondary homes.

Votes by the National People's Congress are a predictable ritual, with party officials exercising discipline behind the scenes to ensure that there are no upsets, but there were pinpricks of dissent. On Thursday, one delegate voted against Mr. Xi to succeed Hu Jintao as president, and three abstained. Mr. Li attracted three "no" votes and six abstentions among the 2,949 votes counted as valid. The secret electronic ballot makes it impossible to publicly identify the dissenters, despite the avid curiosity voiced by some Chinese online.

Another prominent economic decision maker in the new government will be the incoming deputy prime minister Wang Yang, a former party secretary of Guangdong Province in southern China who cast himself as a reformer willing to challenge entrenched privilege.

Lou Jiwei, the chairman and chief executive of the China Investment Corporation, a sovereign wealth fund, appears likely to become finance minister. He will oversee thorny issues like revamping taxation and dealing with debt-saddled local governments that complain of having too many spending burdens.

However, the likely retention of Zhou Xiaochuan as the leader of the People's Bank of China, or central bank, reflects the anxieties weighing on the new leadership, analysts say. Mr. Zhou was dropped from the party's Central Committee -- a council of senior officials -- in November, and he is 65, an age when retirement becomes likely for officials of his rank. But he appears likely to keep his job for now.

"I think that is an indication that they haven't built up any successor," said Joerg Wuttke, a former president of the European Union Chamber of Commerce in China. "They don't trust anybody else, maybe, to deal with a potential financial crisis."

"They need an experienced old hand, and they can't let him go," he said.

Mr. Li grew up in rural Anhui Province and worked for years on one of the impoverished farm communes that Mao Zedong believed could deliver communist equality and bountiful harvests. In late 1977, he won a place in the prestigious Peking University, where he studied law before moving on to economics, and he retains a bookish demeanor and a confident grasp of English. Like his mentor, Mr. Hu, he made his start up the leadership ladder in the Communist Party's Youth League.

Mr. Wen left office dogged by unwelcome attention on his family, which was the subject of a report by The New York Times into its wealth, and lamenting that he "fell short in some tasks" to improve people's lives. Mr. Li and his colleagues appear eager to avoid being tainted with the same accusations of frustrated promises, said Damien Ma, a researcher at the Paulson Institute, a center in Chicago focused on China-United States relations.

"They've got to show that they're willing to act," Mr. Ma said. "Before they felt that they could defer reforms, and they did."

Mr. Li is scheduled to give his first news conference as prime minister on Sunday, after the end of the parliamentary session.

world

This article originally appeared in The New York Times.


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